For-Profit College Students Take on Congress as Hearing Looms

At least 1,500 students from for- profit colleges chanted in front of the U.S. Capitol in Washington today to protest a proposed regulation that would limit their access to government grants and loans.

The rally precedes a Senate hearing tomorrow that will examine whether the schools misled students on their employment prospects after graduation. Education Secretary Arne Duncan on Sept. 24 delayed issuing the "gainful employment" rule to early 2011 after receiving 91,000 comments, the most ever on an education issue, according to department officials.

Duncan’s decision to postpone the regulation until after the Nov. 2 election shows the industry’s pressure is having an impact, said Charles Gabriel, an analyst with Washington-based Capital Alpha Partners LLC, which advises institutional investors on government trends and regulation. The regulation would require for-profit colleges to show their students get well-paying jobs or lose access to federal funds.

“They’re punting until after the election,” Gabriel said in a telephone interview. “If the election gives us a Republican House and Senate, and that’s a very real possibility, they may have to soften the rule and calibrate it in a way that generates less controversy.”


Lobbying Expenditures

The Association of Private Sector Colleges and Universities, an industry trade group based in Washington formerly called the Career College Association, has spent more than $280,000 on lobbying this year, compared with about $200,000 for all of 2009, according to OpenSecrets.org, a Washington-based watchdog group. For-profit colleges are tapping the strength of their 3.2 million students, said Harris Miller, president and chief executive officer of the industry trade organization.

“These attacks have galvanized people who feel there are millions of students out there working hard to get their education,”Miller said. “Every time someone makes fun of our schools, you’re hurting our job prospects.”

The Education Department says the colleges leave many students with onerous debt loads without increasing their employability. Kathleen Bittel, an employee of Education Management Corp., told Senator Tom Harkin, chairman of the Senate Education committee, that the company exaggerated claims regarding students’ job placements and incomes after graduation, according to a letter obtained by Bloomberg News. Bittel is scheduled to testify before Harkin’s committee tomorrow.


Not Swayed

Duncan said the gainful employment rule is still scheduled to take effect by July 2012, and said he wasn’t influenced by the lobbying effort.

“Washington has lobbyists. That’s how Washington works,” Duncan said in an interview Sept. 24 in Washington. “Lobbyists don’t sway me.”

While the postponement may lead to a softer rule, it may also give the Education Department time to make sure the regulations are sound enough to survive any challenge in the courts, said Jarrel Price, an analyst with Washington-based Height Analytics LLC, which provides investment research on regulated industries.

“The delay was initiated due to internal concerns at the department,” Price said in a telephone interview. “It’s too early to determine the amount of influence outside parties will have during the delay.”

The agency can’t pull back from its agenda after having gone this far, said Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars & Admissions Officers in Washington.


‘No Payoff’

“Backing out will have no payoff,” he said in a telephone interview. “They’ve taken a whack at the industry that the industry will never forget.”

Corinthian Colleges Inc., based in Santa Ana, California, bought full-page ads in The Washington Post, New York Times, Los Angeles Times, Chicago Tribune, San Francisco Chronicle, San Jose Mercury News, Contra Costa Times, The Miami Herald, The Atlanta Journal Constitution, The Dallas Morning News, The Seattle Times and The Star-Ledger to protest the gainful employment rule.

The company’s “My Career Counts” campaign says the gainful employment rule would result in the loss of thousands of U.S. jobs and as many as a million students would lose training opportunities.

The students at the rally, many dressed in hospital scrubs and cooks’ uniforms, chanted, “My education, my job, my choice!”

Some of the students had begun making visits to lawmakers’ offices throughout Washington to voice opposition to the regulation.

An index of 12 for-profit colleges, including Apollo Group Inc., the biggest of the companies by enrollment, has fallen 17 percent before today since July 23, when a draft of the gainful employment proposal was released. The industry was also hurt by a U.S. Government Accountability Office probe released Aug. 4 that recorded recruiters at campuses operated by Apollo, Education Management Corp., and the Washington Post Co.’s Kaplan education unit misleading investigators posing as applicants.

BLOOMBERG

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